The Australian parliament has voted to end a controversial carbon tax and plans for an emissions trading scheme. Conservative Prime Minister Tony Abbott says getting rid of the levy will boost business and lower household power bills, but critics insist Abbott is taking Australia backwards.

Abbott believes the carbon tax was a handbrake on the economy, and put too much financial pressure on families.

He said it was a "destructive tax" that damaged jobs, and did little to help the environment.

The levy was introduced in July 2012 by the previous Labor administration. It saw hundreds of the nation’s biggest polluters pay a fee for each ton of carbon dioxide they emitted. After two failed attempts, the legislation to repeal the tax was passed by Australia’s upper house of parliament, the Senate, by 39 votes to 32.

Government Senator Ian Macdonald told parliament the tax was a waste of time and effort.

“Australia emits less than 1.4 per cent of global emissions and without serious work by the United States, China, Russia and the European Union, doing a 5 per cent reduction in Australia will make not one iota of difference,” said Macdonald.

But Australia is the developed world’s highest per capita emitter of greenhouse gases thanks to a reliance of cheap and plentiful supplies of coal.

Critics say the prime minister has committed a monumental environmental blunder, while the Labor opposition leader Bill Shorten said Abbott had “embarrassed” his country.

Labor's Penny Wong, a former climate change minister, said the environment is being punished for short-term political gain.

“A man called Mr. Tony Abbott decided that it was in his political interest not to look to what was responsible, not to look to what was right, not to look to an effective, credible response to climate change, but to stake his political career, his political ambition, on fear mongering and scare mongering,” said Wong.

The government, however, insists that Australia’s promise to reduce its emissions levels by 5% from 2000 levels, by 2020, would be met through a "direct action" plan that includes financial incentives for polluters to increase their energy efficiency.